German car maker Volkswagen (VW) said it had agreed to enter into a "long-term strategic partnership " with state-owned Malaysian car maker Proton, but there were no plans for Europe's biggest car maker to take a stake in its new partner.

"Volkswagen and Proton Holdings have agreed to enter into a long-term strategic partnership. High-ranking representatives of both companies signed a corresponding memorandum of understanding" at VW's headquarters in Wolfsburg on Tuesday, VW said in a statement.

However, under the terms of the deal, there were "no plans for VW to take a shareholding in Proton," the statement said.

And both parties would "retain their full corporate independence."

The deal would enable VW to establish a foothold in the fast-growing car market of Southeast Asia "without having to make extensive capital investments in the region," it said.

"The primary aim is to build up an automobile industry of global market standard in Malaysia, exporting to other countries in the region as well as supplying the local market. Opportunities for joint vehicle development will also be closely examined."

Launching VW models

As a first step, VW and Proton agreed to begin preparations for the assembly of kits of two models.

The collaboration would initially involve only the VW brand.

"The goal is to launch the first models assembled in Malaysia into the local market by the end of 2005. The initial sales target for 2006 is to top 15,000 units."

Proton is 38-percent state controlled and has a 50-percent share of the Malaysian car market where the state slaps heavy taxes on imported cars.